Clean Energy: Can There Be Too Much Capital?

7/20/07Follow @wroush

Thursday night I competed for chips and salsa with a standing-room-only crowd of clean-energy enthusiasts at a Kendall Square happy hour put on by the Renewable Energy Business Network. The mood was upbeat—lubricated, of course, by beer and the Red Sox’s (alas, short-lived) lead over the White Sox on the big TVs at Flat Top Johnny’s, but also by optimism that the global-warming threat will drive massive investment over the next decade in carbon-neutral energy technologies.

Several attendees, including partners from event sponsor (and Xconomy underwriter) Flagship Ventures, told me they believe the sector is hot because it’s inevitable that the federal government will limit the carbon emissions of power plants and vehicles somewhere down the road—if not two years from now, then certainly five or 10 years from now. Companies that can get now-experimental alternative energy technologies online before the clampdowns begin could be in an enviable position to profit as Americans turn to new energy sources to fuel their on-the-go lifestyles. And the Boston/New England region is developing an impressive cluster of companies exploring new clean energy technologies, from wind energy to biofuels. (For visual confirmation see this map compiled by the Cambridge-based New England Energy Innovation Collaborative, whose executive director, the very tall Nick D’Arbeloff, had tickets to the Sox game but skipped it to hobnob with the crowd in Kendall Square.)

But while the turnout was high and the atmosphere cheerful, I was struck by the high ratio of investors, analysts, and fund managers to actual innovators and entrepreneurs. A quick glance at REBN’s e-mail signup list indicated that the people with the capital outnumbered the people with the technology by perhaps five to one. That may be great news for folks with commercializable alternative-energy ideas. But remember what happened in Silicon Valley last time too many venture firms chased too few good ideas? (Thomson editor-at-large Dan Primack, who was also in attendance, noted in his PE Week Wire e-mail newsletter today that he’d overheard some nervous talk of “bubbles.”)

One of the few technology companies that turned up in force at the networking hour was General Compression of Attleboro, MA (the company is in the process of moving to Newton). Chief technology officer Rahul Yarala explained to me that the company is attempting to overcome the biggest weakness of wind power—the fact that it’s sporadic and unpredictable, with most wind farms producing power only 30 percent of the time. Yarala and his colleagues are replacing the generators in windmills with highly efficient air compressors and then storing the compressed air in giant tanks or underground pipelines, which are emptied later to drive large electric turbines on the ground. Storing wind and resurrecting it later is an intriguing and somewhat poetical idea—and in fact we’ll bring you a longer profile of General Compression next week.

Wade Roush is Xconomy's chief correspondent and editor of Xconomy San Francisco. You can subscribe to his Google Group or e-mail him at wroush@xconomy.com. Follow @wroush

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